To many, achieving a worry-free retirement is a dream that will most likely not materialize. Indeed, considering the high cost of living and tremendous foresight required to properly plan for retirement, many never accumulate sufficient assets to provide for the income and benefits they need or desire. According to the Employee Benefit's Research Institute's 1997 retirement confidence survey, of the people who thought they could afford to retire, 30% report their standard of living is worse than at the end of their career and 36% are not confident they will have enough to remain comfortable.
Currently, retirees and individuals investing for retirement have access to a plurality of products that provide for the many financial and other needs that may arise. For example, equity mutual funds can provide potential for market appreciation, life annuities can offer retirees a fixed annual income from a predetermined point until death; life insurance can offer retirees a guaranteed death benefit as well as a secure cash value; long-term care agreements can offer retirees insurance for certain health care benefits; home equity loans can provide a source of cash, etc. Unfortunately, many still do not achieve their retirement objectives due to the fact that they are overwhelmed by the large selection of products and do not properly understand the functionality and purpose of the products they eventually purchase. Often, individuals do not fully understand the nature of risks involved, whether it be market risk or actuarial risk.
Moreover, aside from the often complex aspects of purchasing an insurance or investment product, wherein many individuals end up purchasing inappropriate products, even those who are fully informed and correctly match their current needs with the right product, frequently are not capable to cope with changes in life, where previously purchased products are no longer satisfactory. Unfortunately, the currently offered insurance products do not provide the flexibility to alter the purchased benefits and income once the product has been purchased or ‘locked’ in. Also, by locking in one's assets into a guaranteed insurance product, clients lose out on the potentially higher yields of the stock market or other investment product. Meanwhile, while investment products offer flexibility, they do not provide protection against actuarial risks.
In addition, most guaranteed insurance products have the inherent characteristic of fulfilling a single fixed objective, such as a lifetime income or a guaranteed death payment. As such, providers of insurance lack the ability and incentive to modify the arrangements to meet the clients' needs once the product is sold and that single fixed objective of the insurance achieved. Most people, on the other hand, do not have single fixed objectives and are thus ill suited for products that do not correspond to their need to adapt and change with time. Most people also want flexibility without being forced to lock into a specific product too soon.
Thus, what is needed is an integrated individual retirement system that offers the flexibility to change as needs change while moving to a secure retirement stage over time. This system should further address the confusing elements of insurance and actuarial products so that individuals can properly obtain a flexible benefit program that most nearly satisfies their retirement objectives and changed circumstances over time.